Vivendi SA (VIV) is seeking an improved offer for its phone unit SFR from Patrick Drahi’s cable holding company Altice SA (ATC) after Bouygues SA (EN) unexpectedly boosted its bid last week, according to people familiar with the talks.
While Vivendi still prefers Altice’s proposal because of a higher likelihood of antitrust approval and quicker exit from the enlarged entity, the French company would like Altice to narrow the gap with Bouygues’s bid, said the people, asking not to be identified because the deliberations are confidential. Altice is discussing such a move, even though no final decision has been made, said one of the people.
Bouygues last week brought in a government-controlled fund and sweetened its cash offer to 13.15 billion euros ($18.2 billion), plus a 21.5 percent stake in the entity created from a merger of SFR with Bouygues Telecom. Billionaire Drahi’s proposal includes 11.75 billion euros in cash and 32 percent of the enlarged company from combining his Numericable Group with SFR. Vivendi on March 14 picked Altice over Bouygues for three-week exclusive negotiations.
Vivendi is evaluating cash proceeds as well as criteria including regulatory risks, implications for jobs as well as liquidity of the stake in the enlarged SFR it will retain, the people said.
“It’s decision time for Vivendi,” Credit Suisse Group AG analysts led by Jakob Bluestone wrote in a note. “Bouygues is offering more cash and appears to have government backing, however Altice’s offer has lower regulatory risk and an easier-to-value equity component.”
A spokesman for Vivendi said the Paris-based company remains in exclusive talks with Altice. A representative for Altice, whose headquarters are in Luxembourg, said the cable company is working toward a final agreement with Vivendi.
Numericable shares rose 1.4 percent to 28.35 euros at 4:51 p.m. in Paris, Bouygues climbed 0.8 percent to 29.26 euros, while Vivendi slipped 0.2 percent to 19.60 euros. Altice added 0.8 percent to 31.45 euros on the Amsterdam exchange.
Vivendi is divesting SFR, France’s second-largest phone company, to focus on content and media assets as sales slow and prices decline in the telecommunications market. Choosing either bid, each valued at more than $20 billion, would mean giving up an earlier plan to spin off SFR and distribute shares to investors.
An exit from SFR would be Chairman Jean-Rene Fourtou final act before he hands over to Vincent Bollore. Fourtou, 74, has promised he would return cash from asset sales to investors. Vivendi shareholders are scheduled to gather for the annual meeting on June 24.
Vivendi is confident that combining SFR with Numericable would be approved by French regulators and less likely to face European Union scrutiny because of less overlap in their businesses, the people said. A sale to Bouygues faces greater risks of the EU intervening because it would create an entity that would rival wireless market leader Orange SA (ORA) by subscribers.
Bouygues’s bid has the support of state-controlled Caisse des Depots et Consignations as well as politicians including Industry Minister Arnaud Montebourg.
SFR unions have called on the bidders to sign an accord with employee representatives including guarantees on the company’s almost 9,000 jobs. The unions are seeking today to get Vivendi, Drahi and Bouygues to agree not to cut jobs for at least 48 months after a merger, according to a draft of a proposal union officials showed to reporters in Paris.
The exclusive period Altice has on the SFR talks runs through April 4.
A deal could surpass Actavis Inc.’s agreement to buy Forest Laboratories Inc. in value, making it the second-biggest acquisition announced this year, according to data compiled by Bloomberg. Comcast Corp.’s bid for competitor Time Warner Cable Inc. is the largest. An acquisition could also provide one of the biggest financing deals to loan bankers in Europe this year.
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